Dr. Mohammed Al-dujaili

Department of Non-Metallic Materials Engineering

Faculty of Materials Engineering

University of Babylon

2013-2014

Lecture 3

Department of Non-metallic Materials Engineering

Stage: forth

Subject: Industrial Engineering

Productivity Engineering

Overview Manufacturers can generate new value, minimize costs, and increase operational stability by focusing on four broad areas: production, product design, value recovery, and supply-circle processes.For that, most of the productivity measures used in industry are partial productivity ratios. Despite the fact that a number of total productivity measurement methods for industry unit level have been presented in the literature. These models are not widely used. In recent years the pressure of global competition has compelled firms to focus on strategies for productivity improvements. This emphasizes the need to find appropriate measures for total productivity. Partial productivity ratios are widely used in industry but as such they are too narrow to give a comprehensive picture of the productivity improvements at the industry unit level. The main reason why

total productivity measurement methods with acceptable validity are not used at the industry unit level seems to be that they are too complicated to serve companies encountering turbulence of today's industry world. So, in order to the organizations can be able to choose the appropriate way to measure productivity, must take into account some important aspects which include; Productivity is not an absolute value, but it relative concept, and this means

that an index of the high and the low procure is the comparison result by of some criteria.

Measuring productivity is instrumentality or a tool, not an objective or end. And there is benefits can get it the organization when measuring productivity are;

-The strategic purposes :Organization can be determining her policy in the light of their future performance in comparison with competitors in the industry, and this is

compare (spatial), or between its departments productive and this an time comparison.B – Tactical purposes:

The comparison between productive units, or between the arch functions within the organization, enabling her of control on the performance of its units in the short term.C – Purposes of the planningDuring the processes of measurement and comparison, the organization enable to reach a set of conclusions, that may be related to differences in the volume of shares of inputs in the short and long periods, and find out reasons to put the different options to regulate operation the use to time in the future. So Productivity is an important success factor for all organizations and, thus, it should also be managed. Thereby, Productivity measurement is a traditional tool for managing productivity. So the measurement of productivity can be quite direct. Such as the case when productivity can be

measured as labor- hours per ton of specific type of steel or as the energy necessary to generate a kilowatt of electricity. commonly, there are several

different methods for productivity measurement. Concept of Productivity

the productivity, as the relation between output and input, has been available for over two centuries and applied in many different circumstances on various levels of aggregation in the economic system. It is argued that productivity is one of the basic variables governing economic production activities, perhaps

the most important one. Or Productivity as “relationship (usually a ratio or an index) between output (goods and/or services) produced by a given organizational system and quantities of input (resources) utilized by the system to produce that output”. Any it is process of transforming inputs to outputs in effective and efficient way. As presented in Fig.16 below, where is transformation processes

proceed by fixed operating processes that take places in different departments from the corporation .

Productivity Measurement Methods

Measuring productivity it is process a study and analysis of the used factors in the production with are production process output (the product), that is for purpose of determining the success of the project in the use of productive resources, and available that from through it can be judged on the efficiency of processes and their ability to exploit these resources, and measure of productivity consider the cornerstone to study and analysis of productivity. Where is consider the base in assessment, planning and productivity improvement on level of corporates.

Consequently Productivity is an important success factor for all organizations and, thus, it should also be managed. Thereby, Productivity measurement is a traditional tool for managing productivity. As a result, the measurement of productivity can be quite direct. Such as the case when productivity can be measured as labor- hours per ton of specific type of steel or as the energy necessary to generate a kilowatt of electricity. commonly, there are several different methods for productivity measurement. And these as follows

1. Total productivity

There is many different approaches to measuring productivity have been adopted by industry for different purposes. One of these methods of measuring productivity it is total measurement method. However, the measurement of total productivity is very difficult in practice. Due to that different outputs (products and services) and inputs (e.g. labour, material, and energy) cannot be summed up. The basic equation for total productivity is as follows:

TP= O

L + M + C + E + Q

Where TP = Total Productivity. O = Total output L = Labour input M = materials input

C = Capital input E = Energy inputQ = other inputIn other words, Basic total productivity relationships as follows:

Total Productivity= Output

*Labour input

*Man – year

Man - yearTotal inputLabour inputThis is:

Total productivity= Labour

productivity*

FractionalLabour cost

*Inverse of unit Labour cost

By and large, in productivity measurement, base year unit prices and costs can be used to commensurate dissimilar inputs and dissimilar outputs .In other words, deflated currency units can be used in productivity measurement to represent the amount of input or output. Now, the relative

change in total productivity can now be expressed as a function of the relative changes in the partial productivity ratios and the cost structure of a

firm in the base period as follows :

PT - PT base Σ (Iibase )Δ pT = ------------------------------ = -------------------------- - 1

PT base Σ (Iibase / (Δ p i + 1))

ITbase

-------------------------------------------------- = -1 Σ (Iibase * 1 / (Δ p i + 1))

1

------------------------------------------------- = -1Σ (Iibase * 1 / (Δ p i + 1))

1

- -------------------------------------------------- =1Σ (Cibase / Cibase * 1 / (Δ p i + 1))

Where;Δ pT is the relative change in total productivity, CTbase total costs in base period , Cibase costs of the input i in the base period, and Δ p i relative

change in the partial productivity of input i. Or

2 .Partial Productivity Measurement The partial productivity it is the ratio of gross or net output to single factor input . This expression can be further classified by the type of input: Labour productivity, Capital productivity, Material productivity, Energy productivity...so on. But the problem in implementation of partial productivity measures is that the output over single input ratio does not address the problem of factor trade-offs. Because many of the productivity improvement efforts of a typical production organization involve trade-offs

Total productivity = Units produced

Input used

between the factors of production rather than manipulation of a single factor. On the other hand, partial productivity ratios are much simpler than total productivity measures, and they are widely used in industry. And so on there is several methods to measure the Partial productivity. As in the

following equation ;

The Work Productivity = Output The number of workers

The Capital Productivity = Output

The amount of a capital that used in the production

The Machine Productivity = Output The number of tons of production

The materials productivity =

Output

The Materials amount that used in the production

In other words, Partial productivity is the ratio of total output and a certain kind of input used to produce output: As in the following equation

Where Pi is the partial productivity of input i, o the output, Ii the input I.

3 .Multifactor’s Productivity Multifactor productivity (MFP) it is the proportion of the total production of the parts that involved in the production process, any (MFP) measures the changes in output per unit of combined inputs in production process. Where Multifactor productivity measures reflect output per unit of some

Pi = O Ii

Ii = O Pi

combined set of inputs. Furthermore, the change in multifactor productivity reflects the change in output that cannot be accounted for by the change in combined inputs. As a result, multifactor productivity measures reflect the joint effects of many factors including new technologies, economies of scale, managerial skill, and changes in the organization of production. While labor productivity measures the output per unit of labor input, multifactor productivity looks at a combination of production inputs (or factors): labor, materials, and capital. In theory, it’s a more comprehensive measure than labor productivity, but it’s also more

difficult to calculate, and it is measured as follows:

Multifactor Productivity = Output

Work+ capital +machine +capacity +materials

Or

The final

equation explains that there are many standards for Partial productivity. But the labor productivity measure is the most common and acceptable one, due to the importance of this element in the production process .This is because its elements are of rare and particularly the skilled manpower are efficient. In addition, for being able to create the new productivity and which it multiplies as a result of the knowledge which is possessed in the production process with the passage of time, and is retrieved from memory to devote subsequently for the production process. Similarly, this can keep pace with the rapid technological developments, also the work productivity measure

easy of a comparison with the other elements.

Multifactor Productivity = Output KLEMS

Productivity Example Problems with Solutions

1. Arvia company Branch employs three maintenance officers, each working eight hours per day. Each officer processes an average of five processes per day. The payroll cost for the officers is $820 per day, and there is a daily overhead expense of $500.a. Compute the labor productivity.b. Compute the multifactor productivity, using breakdowns per dollar cost as the measure. The company is considering the purchase of new computer software for the maintenance operation. The software will enable each maintenance officer to process eight breakdowns per day, although the overhead expense will increase to $550.c. Compute the new labor productivity.d. Compute the new multifactor productivity.e. Should the company proceed with the purchase of the new software? Explain.

Solution

a. Labor productivity is simply the ratio of breakdowns to labor-hours:

output(breakdowns) 3 officers×5 breakdowns/day = ------------------------- = ------------------------0.625 breakdowns /labor-hr .

input(breakdown-hrs.) 3 officers × 8 hrs./day

b. Multifactor productivity accounts for both labor cost and overhead:

output (breakdowns) 3 officers × 5 breakdowns /day------------------------------=----------------------------- =0.0113 breakdowns/$.Input (labor cost overhead) $820 + $500The new software increases the number of loans processed per day, but it also increases the overhead.c. New labor productivity:

output (breakdowns) 3 officers×8 breakdowns/day------------------------=--------------------------------=1.0 breakdowns /labor-hr.input (labor-hrs.) 3 officers × 8 hrs./day

d. New multifactor productivity:output (breakdowns) 3 officers×8 breakdowns/day----------------------------------- = --------------------------------- = 0.0175 breakdowns /$.input (labor cost + overhead) $820 + $550e. Purchasing the new software would increase the labor productivity by 60 percent (= [1.0−0.625]/0.625) and would increase the multifactor productivity by 55 percent (= [0.0175 − 0.0113]/0.0113), so it is certainly worth the added overhead. 2. A Modern industrial company (MIC) produces plastic crates, which it sells to industrial companies . With the current equipment, MIC produces 240 crates per 100 logs. It currently purchases 100 logs per day, and each log requires three labor hours to process. MIC is considering the hire of a professional buyer who can buy better quality logs at the same cost. If this is

the case, MIC can increase production to 260 crates per 100 logs, and the labor hours required will increase by eight hours per day (for the buyer ). a. Compute the labor productivity for the current method (i.e., no buyer).b. What will the labor productivity be if MIC hires the professional buyer? Suppose that MIC spends $12 per hour for each worker who constructs the crates. The buyer, however, is paid $24 per hour. The material cost is $10 per log (regardless of who purchases them).c. Compute the multifactor productivity for the current method, using crates per dollar cost (labor + materials) as the measure.d. How does the multifactor productivity change if the professional buyer is hired? Solutiona. Labor productivity for the current method: 240 crates -------------------------- = 0.8 crates/labor-hr. 100 logs × 3 hrs./log

b. Adding the labor of the buyer increases both the inputs and the outputs; the labor productivity would be: 260 crates ----------------------------------- = 0.844 crates/labor-hr. (100 logs × 3 hrs./log) + 8 hrs.This means that the labor productivity would increase by 5.5 percent (= [0.844 − 0.8]/0.8).To combine different factors, we need a common unit of measure: in this case, dollars. The multifactor productivity measures how much output (crates) is produced per unit of input (dollars)c. For the current method, the multifactor productivity is: 240 crates 240-------------------------------------------------------- = ------------------- = 0.0522 crates/$.(100logs×3hrs./log×$12/hr.)+(100logs×$10/log) 3600 + 1000

260 crates 260-------------------------------------------------------------------------------------- = -----------------------

(100 logs ×3 hrs./log × $12/hr.)+ (8 hrs.×$24/hr.) +(100 logs×$10/log) 3600 + 192 + 1000

= 0.0543 crates/$.

This represents an increase of 4.0 percent (= [0.0543 − 0.0522]/0.0522).